Capricorn Energy: Beyond the Barrel

Capricorn has secured a government-approved agreement that merges eight of its Egyptian concessions into a single, modernised contract. This significantly improves cost recovery and profit share while extending the contract life to 2045. EGPC Board approval has already secured the fiscal benefits, with the agreement operational from 1 July 2025. Parliamentary ratification, expected in Q1 2026, will formalise reserve recognition. This sets the stage to reclassify up to 20 mmboe of 2C resources as 2P reserves, unlocking multi-year drilling and production upside.. This is the linchpin to unlocking long-term production and value. Beyond the improved headline terms, the single concession structure creates operational efficiency, simplifies planning, and allows for full-cycle investment across field boundaries, a meaningful improvement over the previous fragmented framework.

Thanks to improved fiscal terms, previously uneconomic assets are now being prioritised for high-margin drilling. Capricorn plans to drill 22 development wells in 2025, with 15 in H2 focused exclusively on the BED area. With liquids already making up 42-43% of production and a low OPEX of $5.1/boe, the increased focus on oil enhances both margin and free cash flow generation. If executed efficiently, this sets a new production baseline. The company is also reactivating high-graded shut-in wells and exploring near-field opportunities, accelerating value capture without needing costly new infrastructure.

Capricorn has reshaped itself into a lean, focused operator with financial strength. It holds $96m in cash and $32m in net cash, giving it flexibility to invest, acquire, or return capital as needed. The legal win over Waldorf could add further upside. Management is also actively screening UK and MENA M&A opportunities under strict return thresholds. This optionality, paired with capital discipline, means Capricorn is well positioned to adapt to changing market dynamics. Meanwhile, the company is pacing its Egyptian investment to match collections, ensuring capital remains internally funded and risk-adjusted, preserving financial resilience through commodity cycles.

• Exploration well results: Results from testing at NUMB and SEH due in H2 2025 will determine commerciality and fast-track tie-back potential, with early success likely to boost investor sentiment.

• Receivables progress: Capricorn has already received $102m YTD from EGPC, beating previous guidance. Receivables now stand at ~$115m. A further material payment is expected before year-end. Continued progress here materially improves liquidity confidence.

• Ratification of concession: Administrative ratification by parliament is expected in Q1 2026. EGPC Board approval is already secured, and the modernised concession will be operational from 1 July 2025. Once formalised, ratification will support reclassification of up to 20 mmboe of contingent resources and trigger an updated CPR

• Reserve booking and CPR update: A positive ratification outcome would unlock up to 20 mmboe of 2C resources into 2P reserves and help underpin future capex and drilling plans. It also lays the foundation for a valuation uplift.

• Production uplift and reserve growth: Continued drilling success in BED and surrounding areas under the new terms could materially boost production and prove up extensions, expanding the reserve base over multiple years.

• Strategic M&A delivery: Accretive deals in the UK or MENA region, if executed with capital discipline, could diversify the portfolio and unlock new growth avenues. Investors are watching closely for tangible delivery on this front.

The company is still owed $172m by EGPC, with payment dynamics heavily influenced by Egypt’s broader macroeconomic position, including FX constraints and fiscal reform. Capricorn has now collected $102m YTD, including a $50m bullet payment received in October. The receivables balance has dropped to ~$115m from $182m. While progress is encouraging, volatility remains.. Rising capex under the new drilling programme increases the risk that collection shortfalls could impact operational execution or limit reinvestment.

Capricorn is undertaking an aggressive 22-well drilling programme under new fiscal terms in 2025, with the majority loaded into H2. This compressed timeline heightens the risk of execution delays, cost overruns, or underperforming wells. Moreover, the success of NUMB and SEH test wells remains uncertain. A miss on these fronts could diminish investor confidence, slow future reserve growth, and challenge the pace of cash flow ramp-up.

Capricorn’s investment case depends heavily on the integrated concession agreement. While EGPC has approved the new terms, the final step is Egyptian parliamentary ratification. While parliamentary ratification is still required, EGPC Board approval has already unlocked the commercial terms of the deal. The agreement is operationally effective from 1 July 2025. Delays here would slow the formal reclassification of reserves and the CPR update but will not affect near-term field development or cash flow. Any prolonged delay may also erode investor confidence and push back the CPR update tied to the new terms.